Economists from the University of Asia and the Pacific (UA&P) emphasized that the Philippines must significantly increase foreign direct investment (FDI) inflows—potentially matching Vietnam's annual levels of US$15 billion to $20 billion—to achieve sustained economic growth of eight percent and accelerate its transition toward a first-world economy. They made these remarks during an economic briefing in Cebu.
Challenge of Sustaining Higher Growth
Economist Bernardo Villegas noted that the country has already demonstrated its capacity to grow by six to seven percent, but the greater challenge lies in sustaining higher growth rates over the long term. “We were telling President (Bongbong) Marcos that growing the economy by six to seven percent is no longer the challenge because previous administrations already achieved that,” Villegas said. “The challenge is how to achieve much higher and more sustainable growth.”
Vietnam as a Benchmark
According to Villegas, Vietnam serves as a compelling benchmark. While the Philippines and Vietnam were once at comparable levels of development, Vietnam has consistently attracted between $15 billion and $20 billion in FDI annually over the past decade. This influx has helped drive rapid industrialization, exports, and infrastructure development. In contrast, the Philippines continues to receive substantially lower investment inflows despite its large domestic market and young workforce. FDI into the Philippines totaled $7.8 billion in 2025, a 17.1 percent decline from 2024 and the lowest level since 2020.
Need for Foreign Capital
UA&P economist Winston Padojinog stressed that attracting more foreign capital has become increasingly important as both government and private companies rely heavily on debt financing to fund expansion and development projects. “What the Philippines needs right now is not more debt. We need FDIs. We need foreign direct investments to fuel the growth of our economy and follow the path of what our other Asean neighbors have taken,” Padojinog said. He warned that insufficient investment has contributed to rising leverage among Philippine corporations, increasing risks within the economy. “The risk in the system becomes a little bit higher compared to putting in equity capital,” he added.
Reforms Open More Sectors
Villegas noted that the Philippines was once regarded as the “sick man of Asia,” discouraging foreign investors from committing capital to the country. While investment inflows improved under previous administrations, reaching around $10 billion to $11 billion annually, they remain below those of regional competitors. He attributed part of the country’s historical underperformance to constitutional restrictions that limited foreign ownership in key industries. For decades, foreign investors could own only up to 40 percent of certain enterprises, making the Philippines less attractive than neighboring economies. However, reforms under the amended Public Services Act have opened sectors such as airports, railways, toll roads, and telecommunications infrastructure to greater foreign participation. “Now that’s no longer an excuse,” Villegas said.
Infrastructure and Agriculture Key
Both economists stressed that attracting larger volumes of foreign investment will require continued improvements in infrastructure and competitiveness. Villegas said the Philippines historically spent only around three percent of gross domestic product (GDP) on infrastructure, far below the levels seen in Vietnam, Thailand, and Indonesia. Although infrastructure spending has increased to around six percent of GDP in recent years, major gaps remain. “Anyone who has traveled will know that we’re so far behind even Vietnam in infrastructure,” he said. Padojinog expressed hope that major infrastructure projects, including new ports and transport connectivity investments, would help improve the country’s attractiveness to investors.
Beyond infrastructure, Villegas identified agriculture as another critical area for reform. He said the country must modernize the sector through investments in irrigation systems, farm-to-market roads, post-harvest facilities, and large-scale agribusiness ventures. Despite having similar natural advantages, the Philippines continues to lag behind Vietnam in agricultural exports.
Path to Eight-Percent Growth
Villegas outlined three conditions necessary for the country to achieve annual GDP growth of eight percent: attracting $15 billion to $20 billion in annual FDI, sustaining infrastructure spending, and improving agricultural productivity while reducing corruption. “If those three things are fulfilled by any president, we will be growing at eight percent,” he said.
The call for stronger investment comes as the Philippine economy faces slowing growth, elevated inflation, and growing uncertainty in the global economy. Padojinog noted that the country’s dependence on imports makes it vulnerable to external shocks and exchange-rate fluctuations, while slower government spending has weighed on economic activity. He added that the Philippines continues to lag behind regional peers in attracting the level of foreign capital needed to support long-term expansion.
Despite near-term challenges, both economists expressed optimism that reforms already implemented under the current administration have laid the groundwork for stronger growth in the future. “The next administration can now build on the foundation,” Villegas said, adding that sustained investments in infrastructure, agriculture, and investor-friendly policies could help the Philippines narrow the gap with its Asean neighbors and sustain higher growth over the coming decade.
